Analysis: With tax bill, Dems pick political fight

WASHINGTON – In the year-end tax debate of 2010, President Barack Obama got the economic stimulus he sought while Democrats in Congress settled for picking a political fight.

Far more quietly, Republicans pocketed a two-year extension of George W. Bush-era tax cuts at all income levels and a sweetened estate tax to go with it, without having to swallow billions in public works spending that would have inflamed their tea party supporters.

By the time Obama had signed the bill on Friday, he and Rep. Eric Cantor, the conservative Virginian in line to become House majority leader, could have read entire sections of each other's speeches.

"This tax deal is not perfect, and nearly all of us, myself included, disagree with certain elements of this bill," Cantor said Thursday night before the legislation cleared Congress, echoing what the president said at the signing ceremony.

The bill was "prompted by the fact that tax rates for every American were poised to automatically increase" on Jan. 1, Obama said on Friday. "That wouldn't have just been a blow to them — it would have been a blow to our economy just as we're climbing out of a devastating recession."

Cantor had put it this way: "The choice is to act now or impose the onset of a $3.8 trillion tax increase that will crush the fragile recovery and cost tens of thousands of jobs nationally."

It was, as Florida Republican Rep. Ginny Brown-Waite said in the House, "a bipartisan moment of clarity."

It won't last.

Republicans will be in a position to pay less deference to the Democrats in Congress beginning in January, when the GOP takes control of the House and adds seats in the Senate. Cantor, Ohio Rep. John Boehner, who's expected to become speaker, and the rest of the new Republican House majority will be eager to make a show of cutting spending, more than Obama will support, and much more than most Democrats will consider.

"There will be moments, I am certain, over the next couple of years, in which the holiday spirit won't be as abundant as it is today," Obama said to laughter as he signed the tax bill.

In fact, the alignment of political forces that led to the tax bill could reoccur before the 2012 elections if the president and Republicans leaders decide it's in their mutual interest to rein in federal deficits.

For now, the compromise underscored the change in government the voters decreed at midterm elections on Nov. 2.

Republicans were empowered and House Democrats embittered as the bill took shape, almost exclusively in private.

It unfolded during a 10-day period that Obama, in a moment of particular candor, called political posturing.

Democrats are already focused on the 2012 elections, and their principal objective was to attack Republicans. In the short term, they lashed out at the president as well as at their intended targets, and wound up far from united.

The tax bill, which included extended unemployment benefits as well as a one-year cut in Social Security taxes, drew opposition in the end from 112 Democrats in the House and 14 in the Senate. Only 36 Republicans in the House and five in the Senate spurned the Obama-GOP deal.

Rep. Anthony Weiner, D-N.Y., said Republicans turned out to be "better poker players" than Obama. His was a far more charitable assessment than the one from Rep. David Wu, D-Ore., who said that if Obama couldn't get a better deal, it showed he would be "eaten alive" by the GOP once they take control of the House.

As they take up new positions in the minority, Democratic leaders splintered on the biggest tax bill in a decade.

House Speaker Nancy Pelosi, D-Calif., chose not to vote when the bill passed. Majority Leader Steny Hoyer of Maryland supported it, and Rep. Jim Clyburn of South Carolina, the third-ranking leader, opposed it. So, too, did Rep. Chris Van Hollen of Maryland, a member of the leadership who raised his political profile inside the caucus by aligning himself with critics of the bill.

Even before Obama announced a framework agreement at the White House two weeks ago, congressional Democrats were already pointing toward the 2012 elections, casting themselves guardians of the middle class while depicting Republicans as friends of "millionaires and billionaires."

In the House, they pushed through legislation to extend the Bush tax cuts only on incomes up to $200,000 for individuals and $250,000 for couples. It was a nonstarter in the Senate, where Republicans have enough seats to block final passage, and Democrats knew it.

That wasn't really the point.

A few days later, at a time they — but not the public — knew that Obama was certain to reach agreement with Republicans, Senate Democrats staged a pair of Saturday votes.

One was on the House-passed plan, the other an alternative to let taxes rise only on incomes over $1 million. Republicans, predictably, scuttled both.

"I'm going to be here for the next year, next two years, to remind my colleagues that they were willing to increase the deficit $300 billion to give tax breaks to people who have income over a million dollars," said Sen. Chuck Schumer, D-N.Y., making it explicit that the Democratic objective was more related to the 2012 elections than altering the emerging tax compromise.

Democratic unhappiness in the Senate was mild compared with that in the House, where the party's grip on power is measured in mere days.

"Just say no," the rank and file chanted at a closed-door meeting.

They pledged to keep the bill from the House floor unless it was changed, but were forced to relent when reminded that a tax increase would certainly follow.

Instead, they were allowed a vote to remove the estate tax provision they opposed, but failed.

One more final maneuver — to reject the bill and pass one without any tax cuts for the wealthy — would have thrown the issue back to the Senate. It was viewed as too politically risky a few days before taxes were scheduled to rise on millions.